After a slight rise, Ethereum faced a major rejection, causing the price to retreat towards the critical support area at $1.5K.

Currently, there is a strong attempt to break this important support. If successful, the market may face sharp declines.

Technical Analysis

by Cheyenne

Daily chart

Looking at the daily chart, Ethereum initially showed strong bullish momentum after finding support around the $1.5K range. However, upon reaching the 100-day moving average at around $1.7K, Ethereum was rejected, resulting in a sharp downtrend.

This downtrend has returned to the broken 100-day moving average, indicating a very bearish path for ETH price. It has now revisited the previous major swing low at $1,529, which is in line with the important support level at the 61.8% Fibonacci threshold. This area acts as a last line of defense for the bulls, and a break below it could trigger a rapid market cascade.

Four-hour chart

By analyzing the 4-hour chart, we can see a period of sideways consolidation characterized by a falling wedge pattern. This consolidation range is bounded by the major support level of $1.5K and the notable resistance of $1.7K. However, the price recently faced rejection from the upper border of this range, resulting in a sharp downtrend that approached the lower border.

The market is on the verge of breaking below the $1.5K support level, with prevailing bearish sentiment strengthening the sellers’ position. A break below this support has become a distinct possibility.

It is important to note that if buyers can outweigh sellers, a sudden reversal may occur, which could result in many short positions being liquidated.

On-chain analysis

by Cheyenne

The chart below shows the estimated leverage ratio measure in relation to the ETH price. It provides insight into the average leverage used by futures market participants. Higher values ​​indicate greater leverage and risk taken by traders in the derivatives market.

Historically, the measure has been on a downward trend, hitting annual lows. This indicates a period of stability in the futures market, as traders use less leverage. However, there has been a notable increase in the estimated leverage ratio in recent weeks. Although it has not yet reached alarming levels, this rise indicates a growing enthusiasm in the futures market, which may lead to increased use of leverage.

If this increase continues, it could indicate that the futures market is overheating. Although the situation is not alarming at the moment, it is important to view the continued rise of this metric with caution. Additional increases may trigger a short or long squeeze event, resulting in sudden and large movements in the price of Ethereum.